Well-placed to become an export hub for autos and further develop textile industry
The country has the potential to become an export hub for autos and it is well-placed to further develop its textile industry. The growing middle class in India also presents opportunities for businesses, as well as exporters eyeing the Indian market.
India's near-term growth prospects remain lacklustre by recent standards, with the economy likely to expand by 5.3% in 2014 and 6.3% in 2015 – well below the rapid growth rate of around 8% a year in 2001-11. The medium-term economic outlook remains more positive, however, as growth rates are underpinned by the country's favourable demographics, rising middle class and competitive labour costs. With exports accounting for just 25% of GDP, there is scope for India to rebalance away from the domestic economy towards exports.
Key report highlights
* India's Trade Confidence Index increased from 126 in H2 2013 to 137 in H1 2014. In the near term, respondents see Europe as the most promising trading destination, pushing Asia into second position.
* The UAE is likely to remain India's top export destination by 2030, but China is forecast to emerge as the second largest export market, displacing the US.
* Sectors such as pharmaceuticals, transport equipment and textiles will help to accelerate overall export growth.
* Pharmaceuticals exports constitute a small proportion of total exports, but the prospects are upbeat. By 2021-30, pharmaceuticals exports are likely to emerge as one of the top ten contributors to total export growth.
Spotlight on Pharmaceuticals
India's pharmaceuticals sector is the only relatively advanced high-tech subsector.
Presently, both global and domestic circumstances provide the ideal opportunity for India to expand its pharmaceuticals exports.
Key findings
* India's pharmaceuticals sector is relatively advanced and in a position to compete globally. As major brand products in developed markets undergo patent expiration, Indian producers are ready to capitalize on a shift in spending towards generic alternatives.
* Diminishing competitiveness in China and the availability of cheap skilled labour in India will provide further impetus for India to expand its pharmaceuticals exports.
* The pharmaceuticals sector is likely to become one of the top ten contributors to India's total exports in 2021-30, with growth over 2014-30 projected to be slightly faster than overall export growth.
Sandeep Uppal, Managing Director and Head, Commercial Banking, HSBC India said, “The economic potential for India remains strong, with the growing population and rapidly expanding middle class -it presents opportunities for business. India is forecast to emerge as the world's largest middle class market, surpassing both China and US. With the government expected to ramp up investment in sectors like power and transport, demand for capital goods should accelerate. On the export front, while India is already well known for IT, in the medium term we foresee strong growth in pharmaceutical exports with auto as a sector to watch out for in the longer term.”
